The Home Buying Process

Buying a home can be both confusing and overwhelming, especially if it's your first time. We want to help you better understand the process, including who's involved and what you will need to reach your end goal of being a homeowner in the Vermont real estate market. Online homebuying education is available here.

Who's Involved

There are many people involved in the process of buying a home. These include you, the buyer and the seller who owns the current property you intend to purchase. There may be realtors on both the seller's side and on your side acting as an agent/broker on your behalf. Additionally, there is almost always a financial institution, such as Vermont Federal. Once a home is selected and an offer has been made, there will be an appraiser who evaluates the property to verify the value. Oftentimes a home inspector will be involved to provide a full report of the property's defects and functionality issues that might only be visible to someone familiar with construction.

Application & Pre-Qualification

In today's real estate market, it is a huge advantage to be pre-qualified for financing before you start looking for a property. It can also help to determine how much house you can afford and it assures real estate brokers and sellers that you are a qualified buyer.

Applying for a mortgage loan will require that you have significant financial documentation to prove that you can afford the payments. A loan officer will review a variety of information from you to determine the amount for which you qualify as well as your ability to pay back the loan. This may include:

Employment History - Bring current pay stubs and W-2s (if self-employed, you will need two years of tax return documentation)

Income - Any bonuses, commissions, overtime or other sources of income will require additional documentation

Capacity - In addition to your ability to make monthly payments, financial resources are necessary for the down payment, closing costs and some reserves when you are buying a home. Costs at the time of closing, vary based on the price of the property, the tax rates in the town in which the property is located and various other items. View a Sample Fee Worksheet for a property sold at $220,000 with a 5% down payment at a 4.375% interest rate to see the types of funds you might need to close.

Credit - Your credit can be a deciding factor on whether or not you're qualified for a good interest rate on a home loan. Understanding Your Credit is critical for good financial health.

Monthly Obligations/Debt Ratio - Your monthly income must be sufficient to cover expenses related to the mortgage and all other debts. Total mortgage expenses and other loan payments should not exceed 40-45% of your total income. Your credit score can influence the percentage of your monthly income used for debt.

Once all the documentation has been considered, the financing representative will provide you with a pre-qualification letter so that you can begin searching for your dream home.

Purchase/Sales Contract

There are many options to consider when looking for a home, including which communities and neighborhoods you'd like to live in, what style home you prefer and also the price range at which you can afford. A real estate agent can help you prioritize your wants/needs to find the perfect home and also help you with writing up an offer to purchase.

Appraisal

When the borrower requests a loan from a lending institution, the lender must contact an appraiser. The appraisal process develops an opinion of value for the lender to determine if the sales price is supported. The appraiser visits the property, researches comparable sales data in the area of the property and submits a report to the lender with their analysis of the property value.

Inspection

Many people request that an inspection be done on the property prior to the sales contract being finalized. We recommend this to home buyers to ensure that they are aware of any defects in the home that might affect the value and therefore the selling/offer price. An inspector works for you (and thus is paid by you) and is usually trained in construction to look specifically for defects and functionality issues that may not be obvious, except to an expert.

Closing

Closing is the final step in the home buying process and makes the property officially yours. Your real estate agent, attorney and/or lender will help you prepare for this to make sure you have all the necessary documents and, of course, the proper closing payment. You will be required to obtain and pre-pay for one year of home-owner's insurance (also referred to as hazard insurance) and to provide a copy of proof of insurance to the lender. Your attorney will perform a title search to assure that the seller owns the property and has a right to sell it to make sure there are no liens against the property. Closing cost estimates will be provided to you within one business day prior to closing. All closing costs are due at the time of closing. If all documentation and payments are made, you are the owner of a new home!

Meet Our Mortgage Officers

If you are interested in learning more or wish to obtain a pre-qualification from Vermont Federal Credit Union, please contact our Mortgage Officers. You may also request a FREE copy of our Home Buying Member Workbook, which provides helpful tips and worksheets to guide you through the home buying process.